A BV incorporated is realized by one or more incorporators pursuing the realization of a notarial deed before a civil-law notary. The notarial deed of the incorporation must be in written in the Dutch language and must at least include: the company’s articles of association and the amount of share capital issued.
Business may be conducted during the incorporation provided that “i.o. (i.e. “in oprichting”) are included in its name, which entails that the business is still in its operationalization stages. The people acting on behalf of the BV will be liable for any repercussions as a consequence of business conducted until the completion of incorporation and ratification of actions by the BV. A similar liability arises whenever the BV is unable to realize obligations and therefore fail to ratify actions. The same applies to people in charge who knew of the BV would be unable to fulfill obligations, knowingly. Additionally, given a bankruptcy within 1 year, the burden of proof lies with the people responsible. Lastly, members of the board of directors are also liable to third parties for legal actions taken after incorporation but before the registration of the BV within the Trade Register.
A BV (Besloten Vennootschap) is required to have a share capital, which is made up of shares with a par value denominated in Euros or another currency. There is no specific minimum amount for the share capital, as long as at least one share with voting rights is owned by someone other than the BV.
When purchasing shares, payment can be made either in cash or through non-cash items of property, provided that the value of the non-cash items can be assessed objectively. If non-cash items are used to pay for shares during the incorporation process, the people incorporating the BV must provide a description of the list of assets that were contributed in the process.
In a BV, only registered shares can be issued, and in addition to ordinary shares, priority shares and preference shares may also be issued, each with their own unique rights as determined by the articles of association. Within each type of share, different classes (such as A, B, and C shares) may also be created and granted specific rights, such as in the event of liquidation.
The voting power of a shareholder is usually tied to the nominal value of their shares, but it is possible to assign different voting rights to different classes of shares, even if they have the same nominal value. Additionally, non-voting shares can be created, as well as shares that do not entitle the shareholder to any dividends. However, non-voting shares must still provide the right to a share of profits.
The inclusion of share transfer restrictions is not mandatory in a BV’s articles of association, but if chosen, such restrictions can be accompanied by specific guidelines for determining share prices and a lock-up clause that prohibits share transfers for a defined period. Moreover, the articles of association may impose additional obligations on shareholders, such as the requirement to extend loans or supply goods to the BV.
To transfer shares in a BV, a deed of transfer must be executed in the presence of a civil-law notary. The board of directors is responsible for maintaining an accurate shareholders’ register, which includes information on each shareholder’s name, address, shareholding, and payments made on each share, as well as any details of share transfers, pledges, or usufructs.
The management structure of a BV consists of the board of directors and the General Assembly of shareholders. A BV is allowed to have a supervisory board under certain circumstances.
Board of directors
The board of directors is responsible for managing the BV. The members of the board of directors are appointed and removed by the shareholders (unless the BV is of large size).
The articles of association generally state that each director is solely authorized to represent the company. However, the articles of association may provide that the directors are only jointly authorized. Such a provision in the articles of association can be invoked against third parties.
The articles of association may provide that certain acts of the board of directors require the prior approval of another corporate body such as the shareholders’ meeting or the supervisory board. Such a provision is only valid internally and cannot be invoked against a third party, except where the party in question is aware of the provision and did not act in good faith.
A member of the board of directors of the company can be held liable by the BV, as well as by third parties. The entire board of directors can be held liable to the BV for mismanagement.
An individual member of the board of directors can be held liable with respect to specific assigned duties. The shareholders can discharge the members of the board of directors from their
liability to the company by adopting an express resolution barring statutory restrictions. Besides the aforementioned liability prior to incorporation and registration, liability towards third parties can occur in several situations. For example, in case of the bankruptcy of the BV, the members of the board of directors are severally liable for the deficit if the bankruptcy was caused by negligence or improper management in the preceding 3 years. An individual member of the board of directors can exonerate himself by proving that he is not responsible for the negligence or improper management. In order to combat possible bankruptcy fraud, more effectively, through the program to reassess the bankruptcy law legislation, legal measures have now been taken with the aim of strengthening the position of the official receiver in a bankruptcy.
Dutch law offers a one-tier board structure as an alternative to the traditional two-tier board structure, where the supervisory and management boards are separate entities. This structure consists of a single board comprising both executive and non-executive directors and is applicable to NV (which are also covered on another of our webpages) and BV companies as well as those subject to the Large Companies Regime. In a one-tier board, the executive members handle the day-to-day management, while the non-executive members are responsible for supervising the management performed by all board members, with their tasks extending beyond those of supervisory directors. Moreover, the one-tier board is chaired by a non-executive member, and all board members are collectively responsible for the company’s general course of affairs. As part of the management board, the non-executive members are subject to director’s liability.
General Assembly of Shareholders, Supervisory Board and Liability
Shareholders must hold at least one assembly annually to adopt resolutions by majority vote, unless the articles of association say otherwise. Shareholders may only provide general directions to the board of directors regarding company management. The supervisory board is responsible for supervising and advising the board of directors, and is mandatory for large BVs and optional for other BVs. Management and supervisory boards can be held personally liable for BV liabilities if mismanagement is involved, such as harming creditors’ interests by knowingly entering into unsecured financial obligations. When distributing funds, the board must check that creditors’ interests are not affected, using an equity test and a distribution test. If the BV cannot pay its debts after the distribution, the board must refuse to cooperate. Failure to do so may result in directors and shareholders being held liable for the deficit. No specific timeline is defined for the debts repayable.
Public limited liability company (NV), differences with the BV
The rules and regulations that apply to BVs also apply to NVs, but there are some significant differences. An NV must have an authorized capital, and at least 20% of the authorized capital must be issued, with at least 25% of the par value of the issued shares paid up. The issued and paid-up capital of an NV must amount to at least €45,000. An NV can issue both registered and bearer shares and can issue share certificates.
Large NVs and BVs with an issued share capital, reserves, and retained earnings amounting to at least €16 million and employing at least 100 people in the Netherlands, or a company with a controlling interest having a legal obligation to appoint a works council of more than 50 employees, are subject to the structure regime. Unless exempted, such a company must appoint a supervisory board with specific powers, such as appointing and dismissing the management board and approving major amendments regarding governance. The regulations of the structure regime may also apply to the Cooperative. However, multinationals whose holding company is established in the Netherlands and whose majority of employees work abroad may voluntarily apply the structure regime.
Thank you for reaching out to us. If you have any further questions or require additional assistance, please don’t hesitate to let us know. We are here to help.
Additionally, we can assist you with the establishment of a BV (Besloten Vennootschap). If you would like more details about our services, you can find them via this link .